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SBV discourages capital mobilisation in foreign currencies
The interest rates for foreign currency deposits at the State Bank of Vietnam which are not compulsory reserves has been lowered to 0.5% from 1%. The decision by the central bank was made after it found out that commercial banks have foreign currency deposits in excess, but do not have foreign currencies to serve payment services.
Under the current regulations, commercial banks have to make compulsory reserves on the foreign currency capital they mobilise from businesses and the public. The current compulsory reserve ratio is 7% of total mobilised capital in foreign currencies for less than 12-month term deposits. As for the deposits of more than 12 months, the ratio is 3%.
According to a decision the State Bank of Vietnam promulgated in 2004, the interest rate for compulsory reserves is 0%, and the rate for the money exceeding the compulsory reserves is 1%. Thus, with the newly promulgated decision, the interest rate will be lowered by one-half.
The supply of foreign currencies in December proved to be very short as the deposits in foreign currencies at banks increased, but few customers sold dollars to banks. As a result, banks hesitated to sell dollars to clients. The VND/US$ exchange rates quoted by commercial banks remained at the ceiling rates.
At the end of last month, the State Bank of Vietnam raised the interbank exchange rate by 3% so banks could push the transaction price up to VND17,500/US$1.
Analysts say that the central bank’s decision to slash the interest rate on the foreign currency sums that exceed the compulsory reserves may hinder capital mobilisation in foreign currencies. The deposit interest rate is now hovering around 3-4% per annum, just a half of VND deposit interest rates.
In late January 2, 2009, one dollar was VND17,450 at transaction points in Hanoi. The black market was considered to have remained stable after the central bank’s decision to raise the interbank exchange rate by 3% went into effect on December 25.
VNE
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